Black Country Enterprise - Frequently Asked Questions
These are the most common questions that people ask when starting their own business. If you can't find what you're looking for, please contact us.
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As long you understand the business you are getting into and understand where your strengths and weaknesses lie. It helps to have a strong desire to succeed as the hours you may have to work may be long and the personal sacrifices to income and family life may be difficult to adopt.
It is true to say that many people from different ages, backgrounds and experience succeed. But we find that a common indicator of success is that successful entrepreneurs have usually undertaken some self-examination, counseling and planning. Your individual preparation is a fundamental key to success and that is where we can assist. |
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There are some potential benefits to starting a business despite the inherent risks. You will have more freedom and independence working for yourself. You will also experience a greater sense of personal fulfillment and satisfaction in achievement and financial independence. It's true to say though that not all entrepreneurs get wealthy from their efforts, some do.
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Essential skills required include a working knowledge of basic record keeping, tax, financial management, market awareness, people management and customer care.
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It is a realistic possibility that many businesses can be run from a home environment using modern technology and communication tools. By not having business premises, a business can make significant savings, however such a decision is not without disadvantages. You will need to separate business and home life and if your business subjects neighbours to noise, odours or parking issues, you may need to reconsider.
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It is worthwhile to spend some time assessing the idea you have in terms of what finance you require and what skills are needed. It is also beneficial to have an understanding of what realistic financial return and satisfaction the business could generate.
It's wise to have a thorough understanding of your potential market, with target customers, suppliers, the competition, pricing and possible profit margins fully understood. A useful way of understanding a market is to talk to business owners in similar businesses or even to work as an employee for a time within that market. Suppliers, who sell to the type of business you are entering, can also provide useful information.
In addition to this, trade publications and magazines dealing with your chosen business are valuable sources of information. Your research will help you in understanding the viability of your business idea. You will still need to plan your business, assessing what finance, equipment, and people you need to start your venture. |
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Once you have decided that your business is feasible then you will need to understand the different legal forms of business that exist within the United Kingdom. Setting up your business in the right way can keep your costs down and help prevent your working relationships turning sour. There are five main choices:
Contact Black Country Enterprise on 01384 360632, who can advise you on the start-up process, provide training and access to support on many aspects of setting up a business. |
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Starting a sole trader is the most popular and simplest form of business to start. If you plan to be the solitary owner of the business, you can set up as a sole trader (even if you have employees). Your legal requirement is that you should inform HM Revenue and Customs that you have commenced trading. You can keep simple un-audited accounts however you are personally liable for all your business debts.
A partnership is very straightforward to set up and has similar advantages and disadvantages to a sole trader, but there are two other factors to take into account. Each partner is personally liable for all the business debts of the partnership (other than tax on profits) even if the other partner has caused them. It is also easier to raise money by introducing new partners. In an ordinary partnership, each pays tax and NI on their share of the profits.
A limited company is a little more complex to set up. To register a limited company you will need to contact Companies House. Alternatively, you can pay an accountant, solicitor or company formations agent to do the task for you. The main advantage of a limited company is that of limited liability. Usually your liability is limited to the amount you agree to invest in the company by buying its shares, which means your risk of loss is normally limited to the money you invest in the business, however, you could be personally liable if you allow the business to trade wrongfully or fraudulently.
Annual accounts however are generally more complicated but it is easier to raise finance or sell a part of the business. There can also be tax advantages for high earners through keeping money in the business or making pension payments but if you decide to cease trading it can be more difficult and expensive to wind up a limited company.
Setting up and running a limited company generally involves more administration and extra costs. One option is to start as a sole trader and then form a company later on as the business develops. A limited liability partnership is a corporate body with its own legal identity and capacity. It has the organizational flexibility of a partnership and is also taxed as a partnership.
A limited liability partnership must be registered at Companies House and again you may want to use an accountant, solicitor or registered agent to deal with these formalities for you. |
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With a franchise, you are using a tried and tested formula and benefit from the experience and support of the company offering the franchise. It is sometimes easier to secure bank finance for a franchise business and in most cases they have a generally lower failure rate than completely new businesses. However there are increased costs with various fees attributable to the franchisor and there are trading restrictions albeit with exclusivity.
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You're legally required to notify HM Revenue and Customs. Decide whether you'll trade under the names of the partners or use a separate business name. There is no legal requirement to have a partnership agreement but not having one could be reckless. Setting up a Limited liability Partnership is more complicated.
It's always best to have a business partnership deed so that if anything should happen to one of the business partners, or you should fall out, there is a legal agreement entered into at the start which establishes how the business partnership should be dissolved and how the assets and liabilities allocated. Learn more about partnership agreements on our free workshop. |
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Legally, you need to ensure that your business name is distinct from your competition, otherwise you can be taken to court for 'passing off'.
Sole traders and partnerships can all trade under their own name or a business name. Sole traders and ordinary partnerships are prohibited from using the word "Limited" (or Ltd).
Companies can choose alternative names for trading. However, if a company does this, it must disclose ownership and the official business address on its stationery, at the premises and if anyone asks. |
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Various legal issues often arise when you start a business. Common issues include:
Talk through your plans with an experienced advisor. |
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You can get lists of commercial property available in the Black Country, including office, industrial and land from Black Country Investment. For details of retail premises available, contact the various commercial property agents in the area. For details of council owned property and business centre office space, contact your local council. |
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To find out whether you can access grants and funding, contact local and regional funding sources, including banks. It will very much depend on what you want the funding for. Contact Business Link West Midlands to find out more about your options. |
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There are many organisations that provide opportunities for businesses to network with each other, including your local Chambers of Commerce, The Enterprise Network and many more. |
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You are legally required to keep your records for six years. If you want to learn more about book-keeping, register for our free workshop.
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Yes, from October 2004 they have applied to all employers. Find out more about employment law on our free workshop.
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Corporation Tax is the tax that limited companies and unincorporated associations (such as clubs) pay on their profits. It's a tax on the profits of the company; profits include interest and capital gains. Corporation Tax is accounted for in 12-month periods, unless the accounting period from its commencement to the first accounting date, or the last period of operation, is less than 12 months.
Every company has to fill in an annual Corporation Tax Return (Form CT600) and this Return has to be submitted by the company secretary or the directors within 12 months of the end of the accounting period. Find out more about tax and your business on our free workshop. |
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It all depends. As a general rule, it's inadvisable to incorporate if your profits are under £50,000 for sole traders and £100,000 for two people in partnership, but with the rates of corporation tax as they currently are, many businesses are incorporating with profits lower than these. Find out more about Limited Company Formation on our free workshop. |
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If you are a sole trader you can take drawings from your business and pay tax the following year. As a limited company, you can either pay yourself from your own company by a salary (which could be in the form of a bonus or other remuneration) or, so long as you hold shares in the company, you could pay yourself from your own company by a dividend.
If you are paid a salary from your own company, normal PAYE rules apply. If you are paid a dividend, your company doesn't have to pay any tax over at the time of making the distribution. This is because dividends can only be paid out of profits which have already been taxed. In principle, dividends are now a more tax-efficient way of withdrawing profits from a company than salary.
If you have lent money to your company and that company wishes you to be able to withdraw some of that loan (to have it paid back), there would be no tax involved with any such repayment. |
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For most new businesses, you must start adding VAT onto your business invoices when your turnover exceeds £67,000 a year (2008/09 figure). |